Key Points:

Internet giant Yahoo! plans to break Google's stranglehold on the market for search engine advertising with a technology platform that will allow companies to better target Kiwi web surfers.

From next week, Yahoo! will go live with what has been dubbed Project Panama - a system for search-engine advertising that will split New Zealand into 16 regions for geographically targeted advertising and allow ads to be posted to the web within minutes.

The New Zealand internet advertising market was worth about $65 million in the year to September, according to the Interactive Advertising Bureau.

But that figure does not cover search-based advertising, which in New Zealand and abroad has been dominated by Google's AdWords service.

Yahoo! and Google ads run at the top and right side of search results and are matched to the search terms punched into the search bar. Advertisers are charged each time the ad is clicked on.

In Australia, where the search-related advertising market is estimated to be worth about A$250 million ($277 million), Google has about 80 per cent share of the market.

The delayed Panama project puts Yahoo! on an even footing with Google, but Yahoo! claims a series of new features give it an edge over its larger rival.

"The one that's most significant for New Zealand is geo-targeting," said Craig Wax, the regional manager for Yahoo! search marketing.

"Advertisers will be able to target specifically where their ads go from a geographic perspective."

A New Zealand internet user's location would be determined by the term they enter into a search engine, their Yahoo! account details and their IP (internet protocol) address. "They might type in 'Auckland restaurant' or they might be a registered Yahoo! user with weather settings set up for Auckland," said Wax.

A New Zealand advertiser would now be able to target certain cities or regions whereas previously ads from New Zealand would have to be delivered across Australia as well.

Previously slow and clunky for advertisers to use, Yahoo!'s system had been streamlined so that advertisers could get ads up for time-sensitive advertising campaigns.

"In the past when an advertiser submitted search listings, we'd go through a manual review, which would typically take 24 hours to turn around, sometimes up to three days."

Yahoo! will also allow up to 20 variations of the same ad to appear on the search engine to test which attracts the best click-through rate.

The way competing adverts are ranked on the search engine is being changed to focus on the click-through success of ads. This would avoid the biggest spender always getting top billing, said Wax. "Now we'll organise listings based on a mix of ad quality and bid amount," he said.

"New Zealand advertisers are likely to get better click-through rates when their ads are being served in front of Kiwis.

"They'll be rewarded for that and won't have to pay as high a click amount to move up the ranks when someone is doing a search on Yahoo!Xtra or Msn.co.nz, which is one of our distribution partners."

Yahoo! is hiring an Auckland-based staff member to oversee local search advertising. The company in February teamed with Telecom's internet provider Xtra to form the content portal Yahoo!Xtra, which has had a low-key debut.

"Now we've a better value proposition we'll invest more in our team in the market," said Wax. While he acknowledged Google's market dominance, he said Yahoo! had a sizeable share of the search engine market so couldn't be ignored by advertisers starting web-based campaigns.

"Google's platform and ours are complementary. If you're an advertiser and you want to get maximum exposure, you have to be on both platforms."

Honing the search

* The new Yahoo! search advertising platform will divide New Zealand into 16 regions which advertisers can target.

* Advertisers will be able to post ads to the web in minutes rather than days.

* Multiple forms of the same ad will be displayed to test the effectiveness of each version.

* A new focus on quality advertising with rankings now determined on click through rates as well as the price advertisers bid for a spot in the rankings.